Seventh Circuit Requires Full Daubert Hearing and Ruling Before District Court Rules on Class Certification

In an opinion released on April 7, 2010, the Seventh Circuit Court of Appeals held that, when an expert’s opinion is critical to class certification, a district court must conclusively rule on any challenge to the expert’s qualifications or submissions, performing a full Daubert analysis if necessary, before ruling on a class certification motion. American Honda Motor Co. v. Allen, ___ F.3d ___, 2010 WL 1332781 (7th Cir. April 7, 2010) (per curiam). American Honda is the latest in a series of Seventh Circuit cases to emphasize the rigorous fact, and often merit-based analysis district courts must undertake before ruling on a class certification motion. It is also consistent with, and expands upon, the developing law in other circuits. See, e.g., In re Hydrogen Peroxide Antitrust Litig., 553 F.3d 305 (2d Cir. 2008) (vacating order granting class certification where district court did not adequately consider expert opinions).

Plaintiffs were purchasers of Honda Gold Wing GL 1800 motorcycles who alleged the GL 1800 had a design defect that made it unstable and unsafe to ride. Plaintiffs sought to represent a class of persons who purchased GL 1800s between 2001 and 2008 and offered the opinion of a motorcycle engineering expert to demonstrate the predominance of common issues. Based on the testing of one used GL 1800 the expert concluded that all GL 1800s manufactured during the alleged class period were defective because they failed to meet the expert's "wobble decay standard." Honda moved to strike the expert's report pursuant to Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993), arguing that the expert's wobble decay standard was unreliable.

The district court recognized that it needed to decide whether the expert report was admissible before certification because Plaintiffs’ predominance arguments rested largely upon the expert's theories. 264 F.R.D. 412, 425 (N.D. Ill. 2009). The district court also shared Honda's concerns about the expert's report. Nevertheless the district court declined to exclude the report in its entirety at such an "early stage of the proceedings,” id. at 428, and granted plaintiffs’ motion for class certification and certified two classes of individuals who purchased the Honda motorcycle.

The Seventh Circuit granted Honda's Rule 23(f) petition for leave to appeal. The Seventh Circuit had already held that a district court must make the factual and legal inquiries necessary to ensure that requirements for class certification are satisfied before deciding whether a class should be certified, even if those considerations overlap the merits of the case. Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 676 (7th Cir. 2001). The Seventh Circuit had also held that a plaintiff cannot meet its class certification burden merely by hiring a competent expert to state the necessary conclusions. West v. Prudential Sec., Inc., 282 F.3d 935, 938 (7th Cir. 2002). The Seventh Circuit had not, however, addressed the specific question of whether a district court must resolve a Daubert challenge before ruling on class certification if the testimony challenged is integral to the plaintiffs’ satisfaction of Rule 23’s requirements. American Honda, 2010 WL 1332781 at *2.

The court summarily answered the question presented:

[w]hen an expert's report or testimony is critical to class certification … a district court must conclusively rule on any challenge to the expert's qualifications or submissions prior to ruling on a class certification motion. That is, the district court must perform a full Daubert analysis before certifying the class if the situation warrants. Id. at *3.

Having answered the question presented, the court went on to make the Daubert ruling the district court had effectively deferred before granting class certification and reached the "inescapable" conclusion that plaintiffs' expert report should be excluded. Id. at *4. Plaintiffs' expert's theory had not been "generally accepted" by anyone other than plaintiffs' expert. Id. at *5. The "principles and methodology" underlying the expert's report were "questionable at best." Id. The court also determined that testing only a single motorcycle was not sufficient. Id. at *6. The court concluded that the expert's report was simply unreliable and, without the expert's report, plaintiffs could not satisfy Rule 23(b) (3)'s predominance prong. Id. The Seventh Circuit vacated the orders denying Honda's motion to exclude and granting plaintiffs' motion to certify the class.

As the court noted, many (but not all) district courts within the Seventh Circuit were already resolving Daubert challenges before ruling on class certification. Id. at *2. These courts, however, had relied on varying authorities because no circuit court had squarely addressed the issue of whether a full-scale Daubert hearing could be required in connection with a class certification hearing. Id. American Honda removes any doubt and provides a clear, unequivocal statement as to the appropriate conduct of class certification hearings in the Seventh Circuit. The opinion raises the bar for both plaintiffs and defendants by requiring that expert opinions meet rigorous standards of competence and credibility before they may be used to support, or to oppose, class certification.